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Evening markets: benign weather overshadows crops

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The vital signs said "go" on Tuesday, but food commodities said "no", unable to shake off the clutch of bears as weather turned favourable for crops.

Economic data looked promising, with US housing starts up 17.2% in May - signalling a revival in a market which proved the epicentre of the credit crunch – while American producer prices rose only 0.2% over the month. That eased fears of rising inflation, which would push interest rates higher.

This helped weaken the dollar, which has acted as a safe haven for investors during the crisis.

Comments from, Russia's president, Dmitry Medvedev, that the greenback had failed to perform its function as a reserve currency also sapped the greenback, if appearing somewhat at odds with comments from his finance minister earlier in the week.

Oil took the expected cue from the return of the greenback's return above $1.38 to the euro which by making dollar-denominated currencies cheaper to foreign buyers, should help commodity prices.

New York crude for July added $0.48 to $71.10 a barrel at 17:00 GMT, with Brent up $0.65 to $70.89 a barrel.

Sudden sell-off

However, Chicago commodities flagged - even soybeans, investors' recent favourite, which dropped back from an earlier high of $12.19 a bushel to stand at $11.90 ¼ a bushel, down 6.75 cents on the day.

"Grains suddenly sold off to new lows for the day in most pits and we are now mostly a bit lower, surprising many traders given the weak dollar," Vic Lespinasse, marketwatcher at GrainAnalyst.com, said.

"More long liquidation was seen on this latest break, along with a growing amount of new short selling scattered across the floor. For now, the bears are in control."

The prospect of better weather in key growing districts was also to blame, other traders said, with US data already showing that spring crops, while delayed, are in better-than-average condition.

July corn lost 0.75 cents to $4.05 ¼ a bushel.

Wheat lost 8.75 cents to $5.66 ½ a bushel, its lowest for nearly a month.

Juice squashed

Among softs, orange juice extended its losing streak to 11 days, ending 0.4% lower at 77.85 cents a pound. The contract has dropped nearly 18% from a recent peak in late May.

The commodity has been hurt in part by dashed prospects of a storm to disrupt production in Florida, America's biggest citrus-producing state.

However, coffee perked up, adding 1.4% at $1,493 a tonne for London's September robusta contract.

Cocoa straddled the turf, shedding 0.7% to £1,683 a tonne in London but, thanks to the weaker dollar, adding 0.3% to $2,654 a tonne in New York.

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